When the going gets tough, the tough get going, Swedbank said in its latest economic outlook that predicts cold days ahead for the Swedish economy.

Global development • The global recovery is losing steam with the euro zone in a recession and the US only slowly gaining speed. Global growth – estimated at 3.6% last year – was driven by emerging markets. We have revised the growth rate to 3.1% in 2012 and 2013, from October’s 3.6% and 3.7%.

• Global growth relies on the euro zone’s policy response. Our main scenario (55% probability), foresees small steps of progress but high short-term market volatility. A worsening (40% probability) nearly stalls global growth. A euro collapse has a small probability of 5% but with much larger negative growth effects.

Sweden • After strong growth for most of 2011, macroeconomic indicators now suggest that the Swedish economy is slowing significantly. Exports are receding, industrial production is stagnating, and labour market improvements are slowing.

• Growth is revised downwards to 0.6% for 2012 and 1.8% for 2013 as the deepening euro zone crisis will continue to negatively affect the Swedish economy. Worsening sentiments of both households and companies will strain consumption and dampen investments. We expect unemployment to start to rise in 2012, before slowly falling back in 2013, as economic growth picks up moderately.

• Despite a worse global outlook, Estonia is estimated to grow by 2.7% in 2012 and 4.0% in 2013, fostered by domestic demand – investments are supported by growing public sector and environment-related investments; private consumption by the improving labour market situation and easing inflation.

Latvia • In 2011, economic growth was stronger than expected, boosted by exporting sectors and their investments, as well as by household consumption. We estimate that GDP growth exceeded 5%. The IMF/EC-supported bailout programme was successfully completed in December.

• We are lowering the 2012 growth forecast to 2.0%, as slower growth for the main trading partners will cut into Latvian exports, while weaker confidence will dampen consumption and investments. We anticipate growth to pick up again in 2013, reaching 3.2%. Euro adoption in 2014 is still our main scenario.

Lithuania • Consumption and investments continued fuelling GDP growth last year, when the economy expanded by an estimated 6.3%. Unemployment declined by almost 3 percentage points, but real wage growth was still negative. Annual inflation peaked in May and was 3.4% at the end of 2011.

• Growth will decrease in 2012 and 2013, but the economy is not expected to be in recession. The economy will continue to be driven by domestic demand, especially investments. This year, inflation is expected to decelerate to 2.5% and the budget deficit will contract from more than 5% of GDP in 2011 to 3% in 2012. Uncertainty has increased, but euro adoption in 2014 is still possible.